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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The total quantity - or total output of a good produced at each quantity of labor employed






2. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






3. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






4. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






5. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






6. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






7. The change in quantity demanded resulting from a change in the price of one good relative to other goods






8. The practice of selling essentially the same good to different groups of consumers at different prices






9. The sum of consumer surplus and producer surplus






10. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






11. Ed = 0 - no response to price change






12. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






13. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






14. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






15. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






16. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






17. Models where firms agree to mutually improve their situation






18. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






19. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






20. Entry (or exit) of firms does not shift the cost curves of firms in the industry






21. Ed = 8 - infinite change in demand to price change






22. Two goods are consumer substitutes if they provide essentially the same utility to consumers






23. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






24. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






25. Entry of new firms shifts the cost curves for all firms upward






26. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






27. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






28. Ed > 1 - meaning consumers are price sensitive






29. All firms maximize profit by producing where MR = MC






30. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






31. MUx / Px = MUy/Py or MUx/MUy = Px/Py






32. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






33. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






34. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






35. The price of a good measured in units of currency






36. TR = P * Qd






37. A firm that has market power in the factor market (a wage-setter)






38. Es = (%dQs) / (%dPrice)






39. Exists if a producer can produce a good at lower opportunity cost than all other producers






40. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






41. Demand for a resource like labor is derived from the demand for the goods produced by the resource






42. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






43. Exists if a producer can produce more of a good than all other producers






44. The marginal utility from consumption of more and more of that item falls over time






45. The most desirable alternative given up as the result of a decision






46. The imbalance between limited productive resources and unlimited human wants






47. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






48. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






49. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






50. Exists at the point where the quantity supplied equals the quantity demanded